David HughesThe MGA Executive Role: Capacity Management
This is the sixth in a series of blogs containing excerpts from my forthcoming publication, 'The MGA Book'.
The Executive Role: Capacity Management
An MGA is nothing without its product. The binding authority which exists between a licensed insurance company and the MGA. Without that, there is no underwriting, no income and no business.
Getting capacity, managing it and delivering performance are primary roles of the CEO of an MGA.
You may delegate day to day capacity management, but you should ensure your finger remains on the pulse and that any potential issues are raised immediately and handled effectively.
There are 5 key stages in the lifetime of a binding authority:
Finding and getting new capacity
Managing and tracking performance
Collecting a profit commission
Renewing the binding authority
Exiting the binding authority
Many MGAs will strive to get more than one insurer to support them.
This is sound risk management advice, however it does increase the management time in monthly meetings, insurer pack creation etc.
Carrier Strategy
For MGAs with less than £5m GWP, it is strongly advisable to keep with one carrier, and focus on the business to grow it and meet performance targets. Only start to expand capacity relationships when you are entering the 'lifestyle' stage of MGA growth (read more here).
In the early days you have limited time, resources and energy to devote to the difficult and costly process of getting extra carriers onboard. We go back to that key word, focus.
MGA Magic
Develop more than one insurance relationship only when your annual premium income exceeds £5m, otherwise you risk losing focus.
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The author, David Hughes, is founder and CEO of the Insurance Data & Analytics consulting business mulberryrisk.com